In 2024/25, investigations supported by HMRC’s Connect system generated approximately £4.6 billion in additional tax, compared with an average annual yield of around £3.4 billion from Connect cases. The system uses large-scale data analysis to identify inconsistencies and potential tax risks that may require further review.
For businesses and individuals, the growth of data-led compliance means accurate records and consistent tax reporting are increasingly important. This guide explains how HMRC Connect works, what it can identify, and what taxpayers should know when potential discrepancies are identified.
The HMRC Connect system is a data-analysis and risk-assessment platform used to cross-check information held or obtained by HMRC and identify potential inconsistencies in tax affairs. It can flag unusual patterns for further review, but decisions about compliance action are made by HMRC officers rather than by the system alone.
HMRC uses Connect to analyse and cross-match large volumes of information from tax records and data obtained through reporting requirements, statutory powers and other lawful sources. This can help identify inconsistencies between information reported to HMRC and other data available to the department.
The big data system is designed to support risk assessment rather than make final enforcement decisions itself. Where information appears inconsistent, HMRC officers can consider the wider evidence before deciding whether further checks or enquiries are appropriate.
HMRC reported an average additional annual yield of around £3.4 billion from Connect cases, rising to approximately £4.6 billion in 2024/25. That represents an increase of about 35% compared with the historic annual average.
The tax gap in UK is the difference between the amount of tax that should theoretically be paid and the amount actually paid. HMRC’s latest provisional estimate puts the 2024/25 tax gap at £59.2 billion, or 6.4% of total theoretical tax liabilities.
Data-led compliance tools such as Connect form part of HMRC’s wider effort to identify non-compliance and protect tax revenue. However, the £4.6 billion attributed to Connect cases should not simply be deducted from the tax-gap estimate, as compliance yield and tax-gap statistics are measured using different methodologies and periods.
Reducing the tax gap in UK revenues therefore depends on wider compliance activity as well as data-led tools such as Connect.
HMRC increasingly combines traditional compliance work with large-scale data analysis. Connect can help officers identify patterns and inconsistencies across large volumes of information, allowing compliance resources to be directed towards cases considered to present greater tax risk.
HMRC’s Connect system can support risk assessment, but data analysis does not remove the need for professional judgement or further investigation.
Scrutiny of HMRC’s wider data capabilities also continues. In 2025, the Public Accounts Committee raised concerns that HMRC could not provide a complete picture of how much tax UK billionaires pay despite holding substantial data on wealthy taxpayers.
HMRC’s wider compliance activity extends well beyond Connect. Its 2024/25 annual report states that the department protected £48.0 billion in tax through tackling avoidance, evasion and error, showing the scale of HMRC’s overall compliance work.Implications for business and tax advisers
Businesses should make sure information reported across tax returns, payroll, VAT records, accounts and other filings is accurate and consistent. Differences do not automatically mean wrongdoing, but unexplained discrepancies can increase the likelihood of questions from HMRC.
Businesses and individuals can review areas where reporting errors are more likely, including overseas income, property income, online trading and transactions involving connected parties. Where HMRC has already raised concerns, professional tax investigation services can help establish what information is required and how to respond.
Good accounting and record-keeping systems can make it easier to reconcile transactions, identify errors and maintain supporting evidence. The aim is not to replicate HMRC’s technology but to make sure the information submitted to HMRC can be supported by accurate underlying records.
HMRC’s compliance methods, digital reporting requirements and information-sharing arrangements continue to develop. Individuals with more complex income or tax affairs can also use professional personal tax services to keep filings accurate and address issues before they become larger compliance problems.
HMRC’s use of its big data system shows how data analysis has become an established part of UK tax compliance. With approximately £4.6 billion in additional yield linked to Connect cases in 2024/25, businesses and individuals should expect HMRC to continue using data to identify inconsistencies and prioritise compliance work.
The practical response is straightforward: maintain accurate records, report income consistently and address discrepancies early. If HMRC has contacted you or you are concerned about information previously reported, contact Apex Accountants for professional support with your tax position.
The HMRC Connect system is a data-analysis and risk-assessment platform that cross-matches information held or obtained by HMRC to identify potential inconsistencies in tax affairs. A flag does not automatically mean that tax has been underpaid; HMRC officers can review the wider evidence before deciding whether further action is required.
Connect does not simply log into or continuously monitor a taxpayer’s bank account. It can analyse financial information that HMRC lawfully holds or obtains, including information supplied by financial institutions under relevant legal and reporting powers. That information can then be compared with tax records to identify inconsistencies.
Potential risk indicators can include inconsistencies between information reported on tax returns and other data available to HMRC, such as property, financial or online-platform information. A discrepancy does not automatically prove non-compliance, but it may lead to further checks.
The normal assessment time limit is generally four years from the end of the relevant tax period. It can extend to six years where tax has been lost because of careless behaviour, 12 years for certain offshore matters, and 20 years where the loss of tax is deliberate. The exact rules depend on the tax and circumstances.
No. Connect is used to support risk assessment and identify inconsistencies. A risk flag can inform HMRC’s compliance work, but further action depends on the available information and the judgement of HMRC officers.
No. Connect is an internal HMRC compliance system. Taxpayers instead use HMRC’s official online services or HMRC app to access their own tax information and manage supported tax services.
Respond within the requested timeframe and gather the records needed to explain the figures reported, such as accounts, invoices, contracts or bank statements. If the issue is unclear or could involve a significant tax adjustment, professional advice can help you understand HMRC’s request and prepare an appropriate response.
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